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New round of tariffs could hurt US industries, energy groups say

New tariffs the Trump administration plans to levy on Chinese imports could "tilt the playing field" against U.S. oilfield service and supply industry, making them less competitive to foreign rivals, an industry association head said.

The Office of the U.S. Trade Representative on June 15 announced an additional duty of 25% on approximately $50 billion worth of Chinese imports. The new round of tariffs, which focuses on high-tech industries such as aerospace, robotics, industrial machinery, and information and communications technology, are in addition to 25% tariffs the administration had earlier imposed on steel and aluminum imported from China and other nations.

In an emailed statement, Petroleum Equipment and Services Association President Leslie Beyer expressed concern that unilateral tariffs would drive up costs for U.S. manufacturers but not their international competitors. "Rather than leveling the playing field for us, it could tilt the playing field against us," Beyer said. "Our sector's continued economic success depends on cost-effective manufacturing and competitive innovation; both will suffer under the new import duties."

Muted criticism

Because the latest round of tariffs has a less direct effect on the pipeline and exploration-and-production segments of the U.S. energy industry than the earlier steel tariffs, representatives of the industry who were highly critical of the administration when those tariffs were announced were taking a more measured approach in their comments this time around.

American Petroleum Institute President and CEO Jack Gerard focused his criticism on the policymaking process rather than on the tariffs themselves. "The lack of transparency in the process, as well as the absence of consultation with the U.S. natural gas and oil industry to determine the potential impact on U.S. investments, jobs and consumers, is especially troubling," Gerard said in an email statement June 15.

The latest round of tariffs are the result of an investigation that the trade representative launched in August 2017 under Section 301 of the Trade Act of 1974 into the government of China's policies and practices related to technology transfer, intellectual property and innovation.

Gerard said the API is concerned about the detrimental effect of the Section 301 tariffs because they involve "a wide range of industrial parts and products used in the U.S. natural gas and oil industry." He added that the new tariffs "place the costs of China's market-distorting behavior on U.S. consumers and their access to affordable and reliable energy."

Other industry associations on June 15 said they were taking a wait-and-see attitude to the latest round of tariffs, while they gauged the potential impact on their respective members.

"Today's announcement could impact U.S. energy exports in retaliation, but it's still too soon to tell," Neal Kirby, a spokesman for the Independent Petroleum Association of America, said in an email statement.

Wider effects

Other sources said they were concerned with the broader impacts the Trump administration's approach to global trade could have on the domestic oil and gas industry. "I don't think this set of tariffs uniquely hit the energy sector, but they further exacerbate the overall uncertainty in global trading relationships," Joshua Zive, an attorney who specializes in trade issues, said in an interview June 15.

"This is really just part of larger uncertainty of the supply chain that these industries depend on," said Zive, a senior principal with Bracewell LLP.

The current round of tariffs contributes to the level of uncertainty that currently exists in the global system, he said. "We're already seeing how that translates into price increases, and that's whether the products are directly covered by tariffs or not," Zive said.

U.S. Chamber of Commerce President and CEO Thomas Donohue said the U.S. should work with its allies, rather than unilaterally impose tariffs, as a way to address China's trade and investment policies and practices.

"Imposing tariffs places the cost of China's unfair trade practices squarely on the shoulders of American consumers, manufacturers, farmers and ranchers. This is not the right approach," the head of the business association said in a statement.

Jim Magill is a reporter for S&P Global Platts, which like S&P Global Market Intelligence is owned by S&P Global Inc.